Shopping Around For Electric Power

Last year, fed up with what it claimed were high rates, the Chicago suburb of Geneva, Ill., stopped buying power from the local electric company, Commonwealth Edison, and began buying from the Wisconsin Electric Power Company.

''We reduced our costs approximately 22 percent,'' said Geneva's Mayor, Richard Lewis. He added that the city, whose municipally owned utility distributes the power to residents, is already looking to change suppliers again to save even more money. ''There are some real good deals available out there, especially in states such as Iowa,'' he said.

So far, Geneva is an isolated example. But pressure is mounting to allow other customers to ''shop the system,'' seeking lower-cost power outside their region.

To do this, however, the transmission lines of the utilities lying between the buyer and seller must be used. Utilities generally are not required to transmit power for other companies, and, with few exceptions, they have been hesitant to do so. 'Common Carrier' Plan

Some industry executives and customers, however, would like to see more transfers of electricity, which are known as wheeling. Under the most radical approach favored by some big corporations that use a lot of electricity, the transmission system would become a ''common carrier,'' like the railroads. A buyer and seller of electricity would arrange a transaction and then pay a fee to the utilities in between to transmit the power. Such a system was recently instituted for the nation's natural gas pipelines.

Allowing non-utility companies to use the transmission system would be the most dramatic and perhaps the final step in the deregulation of the electric industry.

It would erase the geographical boundaries separating one utility from another, freeing utilities to steal their neighbors' biggest customers. And it could turn the nation's electric grid into a frenzied free market.

But it could also lead to huge rate increases for small customers who do not have the time, knowledge or economic power to shop for electricity. And some say it could disrupt the nation's transmission system, causing blackouts.

For these reasons, the issue of transmission access, or ''mandatory wheeling'' as it is sometimes called, has become the most controversial aspect of electricity deregulation. It has become the test of how far the nation is willing to go in subjecting the electric power business to market forces. Even some who support deregulation in general blanch at the prospect of uncontrolled use of the transmission network. 'You're Crossing a Line'

''When it comes to shopping on the grid, you're crossing a line and that has to be done very soberly,'' said J. Steven Herod, director of coal, electricity and nuclear policy for the Department of Energy.

Wheeling would be beneficial for big corporate customers who now have only two choices: to buy from the local utility or produce their own power. With wheeling, they could buy from power producers in other regions. Utilities with excess capacity and lower-cost energy would be able to sell it to those that are now short of power or paying high prices, promoting efficiency in the market. There are now great disparities between prices charged by utilities.

The general concept of transferring power from place to place makes so much sense, in fact, that electric utilities themselves are doing it more each year. Buying power from another company can save the utility money and postpone the need to build new power plants.

Today, 20 percent of the power that a typical electric company sells is purchased from another electric company. In 1981, the figure was only 7 percent. Southern California Edison, for instance, estimates it is saving as much as $800 million a year by buying power from others, particularly cheap hydroelectric power from the Northwest. Rules May Be Relaxed

The Federal Energy Regulatory Commission, which regulates such wholesale power transactions, is looking for ways to relax rate regulations for such exchanges. In the West, 22 utilities in May began an experiment in which a computer-messaging system is used to facilitate the buying and selling of both power and transmission capacity at rates negotiated by the utilities.

The next step in opening up the transmission system, which has already been taken in some states, is to allow non-utility power producers to sell to utilities outside their own region. For example, three independent power producers in Pennsylvania have received approval to sell power to the Niagara Mohawk Power Company in upstate New York because that company is offering higher prices than the Pennsylvania utilities, according to Gerald F. Walsh, director of the power division of the New York State Public Service Commission. In New Jersey, power from a large cogeneration project being built in Bayonne, which is in the territory of Public Service of New Jersey, will be wheeled to Jersey Central Power and Light. Some Will Pay More

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It is the final step - allowing customers to contract for transmission of power from a remote power provider - where some utility executives draw the line. The same Southern California Edison that saved $800 million by buying outside power spent $40,000 to make a videotape that it is showing to legislators and selling to other utilities. The title: ''Mandatory Wheeling - A Few Win, Many Lose.''

When a utility buys the cheaper power, the benefits are spread to all customers, not just a few, said Howard P. Allen, chairman of the company. But if the biggest customers were allowed to buy from other suppliers, he added, the local utility's remaining customers would have to pay more of the utility's fixed costs in the form of higher rates.

Moreover, he said, if individual customers were allowed to bring in power from outside the region, the utility's lines would be overloaded and the utility itself would not be able to buy the inexpensive power from afar. Concern About Transmission Grid

Another serious concern is whether the nation's power-transmission grid would be able to withstand such wheeling and dealing. The grid is highly interconnected and not highly predictable.

Electricity does not flow over a well-defined path - it follows the path of least resistance. When electric companies in New York or New England import electricity from Canada, for instance, some of that power takes a roundabout route through Pennsylvania and New Jersey. This is known as a parallel flow, or loop flow. If Pennsylvania's lines are fully loaded, the sudden appearance of a parallel flow could overload the line, causing an outage. Thus, flows must be carefully coordinated, and this would be tougher to do, utility executives argue, if the transmission system were opened to others besides utilities. ''The more players you have in the game, the tougher it is to control,'' said Robert Woodward, manager of a transmission system that connects utilities in Pennsylvania, New Jersey and Maryland.

Transmission in some areas is already loaded to capacity, leaving little room for extra transfers. For instance, although there is a national surplus of electricity, New England and Long Island face possible shortages this summer because there is not enough transmission capacity to bring the power to those areas. Environmental Objections

Building new transmission lines could be difficult. Environmental objections are already stalling power line construction, and some recent studies have suggested that radiation from high voltage lines could be harmful.

Pricing is another big issue. A group sponsored by state utility regulators is studying how to compensate fairly a utility whose lines are used by others.

Those who favor wheeling dismiss the technical arguments as a smokescreen by utilities afraid of competition. They say that use of computers and other sophisticated devices can adquately control power flows and avoid disruptions.

The Congressional Office of Technology Assessment has recently begun a study of the technical questions. Congress is not likely to consider legislation to mandate wheeling until the study is done. The Federal Energy Regulatory Commission is also not likely to push soon for mandatory wheeling. Corporate Demands Are Rising

But pressure is mounting from large corporations. In some states they have won the right to wheel power by threatening to move if they cannot get access to inexpensive power. Allowing these customers to bypass their local utility is considered a small price to pay to retain a major employer.

A few years ago, the Grumman Corporation threatened to expand in Georgia rather than on Long Island, its home base. To prevent that, the state allowed Grumman to buy some of its electricity from a New York State Power Authority nuclear plant in upstate New York at prices below what the Long Island Lighting Company charged. Lilco, Consolidated Edison and other utilities were required to wheel the power to Grumman for a fee.

In return for not moving or closing operations, several customers of New York's Consolidated Edison have since received similar access to lower-priced power from upstate, saving, in some cases, several million dollars a year. These customers are the General Motors factory in North Tarrytown, Shearson Lehman Brothers in Manhattan and the Hudson Wire Company in Ossining.

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A version of this article appears in print on August 13, 1987, on Page D00001 of the National edition with the headline: Shopping Around For Electric Power. Order Reprints|Today's Paper|Subscribe